Public Company And Private Company

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Public Company And Private Company

The major points of distinction between a private company and a public company are as follows:

1.    Number of Members. Private companies can be started by 2 persons whereas 7 persons are required to form a public company. Private companies cannot have more than 50 members and there is not upper limit to the number of members in case of public companies.

2.    Transfer of Shares. The articles of association of a private company must contain restriction on the right to transfer shares whereas in case of a public company the shares are freely transferable.

3.    Issue of Prospectus. A private company cannot extend invitation to the public to subscribe to its shares or debentures. But there is no such restriction in case of public company. Thus, a private company is not required to issue a prospectus or file a statement in lieu of prospectus in order to raise capital.

4.    Number of Directors. A private company must have atleast 2 directors and a public company must have atleast 3 directors.

5.    Commencement of Business. Certificate to commence business is required in case of a public company. It is not required in case of private company. A private company can start business after incorporation.

6.    Qualification Shares. The directors of a public company must subscribe to qualification shares. Ii is not necessary in case of a private company.

7.    Statutory Meeting. A public company must hold a statutory meeting within six months of incorporation, but a private company is not required to do so.

8.    Share Warrants. A public company can issue share warrants per bearer, but a private company cannot.

9.    Index of Members. A public company is required to maintain an Index of Members, but private companies not required to do so.

10.    Managerial Remuneration. The overall minimum and maximum limit of managerial remuneration in case of public companies is fixed by the Companies Act. These limits do not apply to private companies.

11.    Restriction on Loans. No restriction is imposed by the Companies Act on a private company in respect of making or guaranteeing loans for the purpose of purchasing its own shares or shares of its holding company. A public limited company is restricted in this respect.

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